Nigeria’s Central Bank has mandated the Nigeria Inter-Bank Settlement System (NIBSS) to directly debit banks for fraudulent transactions, reinforcing stricter accountability measures in the financial sector. This directive aims to curb fraud and ensure banks take greater responsibility for securing their payment systems.
By holding banks financially accountable for fraudulent activities, the CBN is tightening oversight and pushing for stronger fraud prevention mechanisms across Nigeria’s banking ecosystem.
In a bold move to tighten accountability, the Central Bank of Nigeria (CBN) has directed the Nigeria Inter-Bank Settlement System (NIBSS) to immediately debit banks and fintechs for fraudulent transactions passing through their systems. This policy shift aims to enforce stricter compliance with Know Your Customer (KYC) protocols and due diligence measures, ensuring financial institutions take full responsibility for transaction security.
The directive, unofficially in effect since December 2024, follows a major fraud case where a Nigerian bank lost ₦7 billion. Banks failing to detect or prevent fraudulent activity will face instant financial penalties, a move designed to push them toward more rigorous transaction monitoring. “This has always been the foundation of KYC, not just in Nigeria but globally,” said Adedeji Olowe, founder of Lendsqr.
With Nigerian banks losing ₦42.6 billion to fraud in Q2 2024 alone, the CBN’s new rule is expected to reshape fraud prevention strategies across the industry. Already, some banks are tightening scrutiny on large and unusual transactions. However, the directive may also create tension within the financial sector, as institutions navigate the balance between stricter oversight and customer convenience.
As the policy unfolds, its effectiveness in curbing fraud will serve as a critical test for the CBN’s regulatory approach.